Right now, South Korea is creating a Ministry of Low Birth Rate Counter Planning to address what the government has described as a national emergency.

South Korea’s fertility rate—the average number of children a woman is expected to have —is the lowest in the world at 0.72.

The So What

In recent decades, South Korea has transformed from a lower-middle-income to a high-income economy, with real GDP growing on average by 5.7% annually between 1980 and 2023.

The declining ratio of the working-age population to elderly dependents is a serious threat to the country’s economic potential, according to Yunjoo Kim, a BCG managing director and partner in Seoul, part of the People & Organization practice area.

• By 2025, people aged 65+ are projected to make up over 20% of the total population, meaning South Korea will be classified as a “super-aged society” alongside countries such as Japan and Italy.
• By 2050, people aged 65+ are estimated to rise to 40%, potentially the largest proportion of any country in the world.

“Society at large is now starting to wake up to the severity of the situation that will face our nation in the years ahead,” Kim says, drawing a comparison with climate change.

“People heard about the climate threat for many years, but concrete action plans didn’t emerge until the impact on nations and economies became a reality,” he explains.

The macroeconomic impact of the age dependency ratio will be felt before labor shortages begin to bite. This includes reduced tax revenues, which then curtail public spending. But both aspects will eventually become a real challenge for companies, some of which are already offering significant financial incentives to employees when they have a child. One construction firm, for example, is reported to be gifting workers (both men and women) $75,000 per child born.

Many South Korean companies now consider measures to stimulate the birthrate as part of their responsibility to have a positive impact on society, Kim explains, echoing how environmental sustainability has become a cornerstone of socially conscious activity around the world.

Now What

South Korea’s low birth rate has far-reaching implications for many national policies such as taxation, education, migration, and care of the elderly.

And the issue needs to be addressed not only through the efforts of individual companies but also through fundamental policy measures, such as subsidies, tax incentives, and solutions for childcare and education.

Businesses can also play a role in the following ways:

Protect Work-Life Balance. There have been two notable developments in this area: First, in 2018, legislation that capped the working week at 52 hours came into effect, which has helped shift attitudes in a culture where long working hours were the norm. Secondly, the shift to remote during the COVID pandemic has normalized a hybrid work schedule in many fields. Businesses of all sizes should continue to reemphasize their commitment to a greater balance between work and home life, which in turn may increase the attractiveness of having children.

Target Retention of Parent Employees. This could include creating and enforcing rigorous policies to protect and help women who are pregnant or returning to work after a pregnancy. Some companies have also made paternity and maternity leave compulsory. It could include ensuring prominent role models and offering mentoring to new mothers or fathers. Some firms are also providing kindergartens or daycare centers near or within office locations. Such benefits are often compared by workers when considering career options, and could become a key differentiator.

Focus on Productivity. Productivity in South Korea’s small- and medium-sized enterprises is about one-third of that or large companies, according to the OECD’s latest Economic Survey of Korea. Levers to increase productivity could include harnessing the potential of AI and GenAI so that existing employees can be upskilled or reskilled. The shift away from long working hours also promises to enhance employee well-being and increase productivity.